Papa Johns 2012 Annual Report Download - page 100

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Item 9A. Controls and Procedures (continued)
Based upon the evaluation, our CEO and CFO have concluded that our disclosure controls and procedures
were not effective at a reasonable assurance level as of December 30, 2012 solely as a result of the
material weakness identified in Management's Report on our Internal Control over Financial Reporting
related to accounting for certain redemption features of our noncontrolling interests as discussed below.
(b) Management’s Report on our Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Our internal
control system is designed to provide reasonable assurance to our management and the board of directors
regarding the preparation and fair presentation of published financial statements. All internal control
systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
Our management, including our CEO and CFO, assessed the effectiveness of our internal control over
financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) in Internal Control—Integrated Framework. This evaluation identified
a material weakness in our internal control regarding our accounting for certain redemption features of the
noncontrolling interests of our joint venture agreements. Specifically, the review controls in place with
respect to non-routine contractual changes or amendments were not effective. A material weakness is a
deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of the company’s annual or interim financial
statements will not be prevented or detected on a timely basis. The material weakness in our internal
controls resulted in the restatement of our 2010 and 2011 financial statements included in this report. As
a result, management believes that our internal control over financial reporting was not effective as of
December 30, 2012, based on the COSO criteria.
Ernst & Young LLP, an independent registered public accounting firm, has audited the Consolidated
Financial Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an
attestation report, included herein, on the effectiveness of our internal control over financial reporting.
(c) Changes in Internal Control over Financial Reporting
The error identified related to the incorrect accounting for certain redemption features of our
noncontrolling interests. We have implemented certain remedial measures including a review of all
existing joint venture agreements to ensure the accounting for any such redemption features was in
compliance with U.S. generally accepted accounting principles. In addition, we are in the process of
developing enhanced control procedures designed to ensure proper accounting for any future non-routine
contractual changes or amendments to existing joint venture agreements. The material weakness cannot
be considered remediated until the applicable remedial controls operate for a sufficient period of time and
management has concluded, through testing, that these controls are operating effectively.
Except as otherwise discussed above, there were no changes in our internal control over financial
reporting that have materially affected or are reasonably likely to materially affect such controls,
including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 9B. Other Information
None.